Category Archive: 5.) Alhambra Investments

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Global PMI Roundup; August 2017

2017-09-10

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2017-09-10

Stanbic Bank Kenya PMI, Jan 2014 - 2017
The first few days of any calendar month are now flooded with PMI data. Mostly due to Markit’s ongoing and increasing partnerships, we now have access to economic or business sentiment from and for almost anywhere in the world. It isn’t clear, however, if that is a good or useful development. For example, we can see quite plainly that there is a whole bunch of trouble brewing in Kenya. The Stanbic Bank/Markit Kenya PMI fell to a record low 42.0 in...

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Now Capex?

2017-09-09

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2017-09-09

Total Construction Spending, Jan 1994 - 2017
Of all the high frequency data the Personal Savings Rate is probably the least reliable. It is subject to both regular and benchmark revisions that can change the estimates drastically one way or the other. One step up from that statistic is the figures for Construction Spending. The initial monthly estimates don’t survive very long, and lately they have been quite weak in the first run only to be revised sharply higher over subsequent months.

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Toward The Housing Bubble, Or Great Depression?

2017-09-08

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2017-09-08

US Personal Savings Rate, Jan 2000 - 2017
During the middle 2000’s, one more curious economic extreme presented itself in an otherwise ocean of extremes. Though economists were still thinking about the Great “Moderation”, the trend for the Personal Savings Rate was anything but moderate, indicated a distinct lack of modesty on the part of consumers. In early 2006, the Bureau of Economic Analysis calculated that the rate had been negative for all of 2005. It was the first time in seventy...

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2017 Is Two-Thirds Done And Still No Payroll Pickup

2017-09-07

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2017-09-07

Establishment Survey, Jan 2010 - Jul 2017
The payroll report for August 2017 thoroughly disappointed. The monthly change for the headline Establishment Survey was just +156k. The BLS also revised lower the headline estimate in each of the previous two months, estimating for July a gain of only +189k. The 6-month average, which matters more given the noisiness of the statistic, is just +160k or about the same as when the Federal Reserve contemplated starting a third round of QE back in 2012.

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Proving Q2 GDP The Anomaly, Incomes Yet Again Fail To Accelerate

2017-09-05

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2017-09-05

Real Personal Income excl. Transfer Receipts 2014 - 2017
One day after reporting a slightly better number for Q2 GDP, the BEA reports today that there is little reason to suspect it was anything more or lasting. The data for Personal Income and Spending shows that the dominant condition since 2012 remains in effect – “good” quarters, or whatever passes for one these days, are the anomaly. There still is no meaningful rebound in income.

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The Two Parts of Bubbles

2017-09-04

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2017-09-04

Profits & Valuations 1949-1999
What makes a stock bubble is really two parts. Most people might think those two parts are money and mania, but actually money supply plays no direct role. Perceptions about money do, even if mistaken as to what really takes place monetarily from time to time. In fact, for a bubble that would make sense; people are betting in stocks on one monetary view that isn’t real, and therefore prices don’t match what’s really going on.

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Moscow Rules (for ‘dollars’)

2017-09-02

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2017-09-02

China & 'Dollars', Jan 2005 - 2017
In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book added another, “Once is an accident. Twice is coincidence. Three times is an enemy...

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Jeffrey Snider Evolution of Eurodollars, Money as interbank liabilities

2017-09-01

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Jeffrey Snider: Eurodollar University Part 1 —————— Erik Townsend welcomes back Jeffrey Snider to MacroVoices. Erik and Jeffrey discuss: — How Dollar .

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Deja Vu

2017-09-01

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2017-09-01

Central Bank Rate Decomposition
According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is, they claim, the additional premium a bond investor demands so as to hold a security that much longer (more return to...

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Currency Risk That Isn’t About Exchange Values (Eurodollar University)

2017-08-31

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2017-08-31

Eurodollar University
This week the Bureau of Economic Analysis will release updated estimates for Q2 GDP as well as Personal Consumption Expenditures (PCE) and Personal Incomes for July. Accompanying those latter two accounts is the currently preferred inflation standard for the US economy. The PCE Deflator finally hit 2% and in two consecutive months, after revisions, earlier this year.

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Bi-Weekly Economic Review: Don’t Underestimate Gridlock

2017-08-30

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2017-08-30

Bi-weekly
The economic reports released since the last update were slightly more upbeat than the previous period. The economic surprises have largely been on the positive side but there were some major disappointments as well. The economy has been doing this for several years now, one part of the economy waxing while another wanes and the overall trajectory not much changed. Indeed, the broad Chicago Fed National Activity index probably says it all, coming...

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More Noise Than Signal

2017-08-27

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2017-08-27

US Real Gross Corporate, 1951 - 2017
A number of people have forwarded this Bloomberg article – Wall Street Banks Warn Downturn Is Coming – to me over the last couple of days. That fact alone is probably a good argument to ignore it but I can’t help but read articles like this if for no other reason than to know what the crowd is thinking.

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United States Durable Goods In July; Rinse, Repeat

2017-08-27

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2017-08-27

US Durable Goods Orders, Jul 1993 - 2017
The Census Bureau reported today updated estimates for Durable Goods in July 2017. Quite frankly, nothing has changed so minimal commentary is all that is required. The aircraft anomaly from last month faded, leaving total new orders of $229.2 billion (seasonally-adjusted). That is less than in May before the Boeing surge, and less even than estimated order volume in March 2017.

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Questions

2017-08-24

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2017-08-24

US Corporate Profits / Gross Domestic Product, 1950 - 2017
Why are profit margins persistently high? With decent earnings this quarter, corporate profits as a % of GDP will approach (maybe exceed) 10% again. That is abnormally high compared to the period 1960 to 2000. Margins actually started to rise in the mid-80s but really accelerated after 2000 and outside of the 2008 crisis have remained high. Why?

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United States: The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

2017-08-23

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2017-08-23

U.S. Treasury CMT Yields, Jan 2017-Aug 2017
The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day.

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United States: Lack Of Industrial Momentum Is (For Now) Big Auto Problems

2017-08-22

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2017-08-22

US Industrial Production, Jan 2006 - Jul 2017
Industrial Production disappointed in the US last month, dragged down by auto production. Despite the return of an oil sector tailwind, IP was up just 2.2% year-over-year in July 2017 according to Federal Reserve statistics. It marks the fourth consecutive month stuck around 2% growth. The lack of further acceleration is unusual in the historical context, especially following an extended period of contraction.

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Global Asset Allocation Update: No Upside To Credit

2017-08-21

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2017-08-21

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are other changes to the portfolio though so please read on. As I write this the stock market is in the process of taking a dive (well if 1.4% is a “dive”) and one can’t help but wonder if the long awaited and anticipated correction is finally at hand.

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United States: Still No Up

2017-08-19

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2017-08-19

U.S. Retail Sales, Jun 2011-2017
The Asian flu of the late 1990’s might have been more accurately described as the Asian dollar flu. It was the first major global test of the mature eurodollar system, and it was a severe disruption in the global economy. It doesn’t register as much here in the United States because of the dot-com bubble and the popular imagination about Alan Greenspan’s monetary stewardship in general.

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Data Dependent: Interest Rates Have Nowhere To Go

2017-08-18

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2017-08-18

US Employment Cost Index, Jan 2001 - Aug 2017
In October 2015, Federal Reserve Vice Chairman Bill Dudley admitted that the US economy might be slowing. In the typically understated fashion befitting the usual clownshow, he merely was acknowledging what was by then pretty obvious to anyone outside the economics profession.

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U.S. Export/Import: Losing Economic Trade

2017-08-17

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2017-08-17

US Exports, Jun 1989-2017
The oil effect continued to recede in late spring for more than just WTI prices or inflation rates. US trade on both sides, inbound and outbound, while still positive has stalled since the winter.

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